The directors of marketing at Smith Corporation believes that quantity that the

Question

The directors of marketing at Smith Corporation believes that quantity that the company sells is related to Smiths own price and advertising expenditure but is not sure that the relationship is linear.  The marketing director collects 26 weekly observations on these variables to estimate the following regression:

                                                                                                Coefficient                   T Value

Intercept                                                                                 5000.00                       0.9801

Price                                                                                        -10.01                          -2.2128

Price Squared                                                                          -0.52                            -2.9237

Advertising                                                                             40.22                           3.13     

Advertising Squared                                                               -0.81                            -1.58                

R2= 0.3357  

F = 4.781        

Fully Evaluate and Interpret these empirical results on the basis of all available statistics (use a 0.05 significance level).

Explanation / Answer

Ans:

Multiple regression analysis:

Given that

Number of observations,n=26

number of perdictors,p=2

df(regression)=2

df(error)=n-p-1=26-2-1=23

F-statistic=4.781

p-value=FDIST(4.781,2,23)=0.0184

As,p-value<0.05,we reject the null hypothesis and we can conclude that there is overall significant linear relationship between the above variables.

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